Why now could be the time to transition to STP Section 2 in Xero


By now, you’ll be conversant in Single Contact Payroll Section 2. It will see your corporation construct on its current STP reporting to share extra data with the ATO and extra authorities businesses everytime you course of a pay run. With Xero’s deferral quickly coming to an finish, necessary Section 2 reporting is about to start from 31 March 2023. Which means that all Xero Payroll customers should transition to the Section 2 reporting customary. 

With the deadline quick approaching, time is of the essence – which is why we strongly suggest you make your transition at this time. The excellent news is, you’re now in a position to transition all payroll knowledge and opt-in to STP Section 2 with just some steps. In reality, from late January, we’ll begin progressively enabling clients who’ve accomplished the transition to file their pay runs utilizing STP 2 (see beneath for extra particulars).

Unsure the place to begin? Don’t fear – we’ve answered your prime questions beneath. What’s extra, your advisor is at all times there for help, so you should definitely attain out in the event you want additional steerage.

First issues first, what occurs if I don’t transition in time?

To fulfill your reporting obligations, in the event you don’t transition by the March 31 deadline, your capacity to file STP could also be affected till you will have accomplished your STP 2 setup. In case you’re not sure about your transition standing or what actions it’s essential take, communicate to your advisor. Failure to adjust to these transition necessities could end in scrutiny from the ATO and potential penalties.

However can’t I simply transition subsequent month?

STP could be a technical course of – and the bigger and extra complicated your corporation is, the bigger and extra complicated the duty forward shall be. All of which is much more of a motive to get forward now.

I’m seeing some warnings in Xero Payroll – what are these about?

In cases the place your present payroll knowledge doesn’t meet the brand new Section 2 reporting necessities, you’ll be alerted by warning banners inside pay runs or worker payslips. We encourage all clients to take early motion on addressing these warnings by updating your knowledge and opting-in to STP Section 2 as early as doable. 

Why is Xero making a lot noise about this?

With the deadline quickly approaching, our knowledge suggests many employers are leaving issues till the final minute and that would put them in danger from extra scrutiny from the ATO. We’ve been rising our communications as a result of our precedence is to make sure that all of our clients make the transition forward of time. 

How do I full every step of my transition to STP Section 2 in Xero?

To start out your transition at this time, head on over to the STP Section 2 Portal in Xero Payroll to progress by way of every of the next steps: 

The first step

The primary a part of this course of is transitioning your current worker profiles to be STP Section 2 compliant. This implies offering new particulars, like whether or not they’re an worker or contractor. The first step additionally consists of offering extra data when onboarding new staff to Xero Payroll. Extra data may be discovered right here.

Step two

You’ll have to establish and replace sure pay objects with the brand new earnings classes outlined by the ATO for STP Section 2 reporting. It is because gross quantities for every revenue sort will now should be reported as a separate itemised quantity, like additional time or allowances. Head to Xero Central for extra particulars, together with a breakdown of the completely different earnings classes.

Step three

This step will break down paid go away into extra subcategories. We’ll help you with a guided expertise in payroll so you possibly can simply replace current paid go away varieties to fulfill the brand new ATO reporting necessities. You might also discover that a few of your go away pay objects have already got the right reporting class assigned. Go to Xero Central to study extra about this stage.  


Don’t overlook to mark every step as full within the STP Section 2 Portal earlier than transferring ahead. This ensures your payroll knowledge is correct and will assist cut back submitting errors later down the road.

Step 4: Switching to Section 2 reporting

As soon as your payroll knowledge is up to date and also you’ve marked every step as full within the STP2 Portal, you’ll be capable of opt-in to Section 2 reporting. In partnership with the ATO, we’re rolling-out this functionality rigorously to clients throughout late Jan and early Feb. Payroll admins shall be notified in Xero when it’s time to modify.

When ought to I get began?

Now could be the time to transition so that you just meet your reporting necessities. The earlier you possibly can tick this off your to-do listing, the extra ready you’ll be.

Keep in mind, all using Australian companies should turn into STP Section 2 compliant. So in the event you’re working along with your advisor to make the transition, bear in mind they’re possible serving to many others do the identical. Keep affected person as they work by way of the method, and within the meantime, try our Useful resource Hub or Xero Central for extra data.  

The place can I discover extra data on STP Section 2?

That will help you navigate the transition to STP Section 2 in Xero, we’ve gone forward and created a complete guide. This has what it’s essential know (and do) to make the transfer, from step-by-step directions to detailed explainers on go away, earnings and reporting classes. 

On the lookout for extra data? Head to Xero Central or consult with the ATO’s employer reporting tips. And don’t overlook to succeed in out to your advisor for added help. 


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